First Data 2011 Annual Report Download - page 75

Inventory
Inventories are stated at lower of cost or market and consist primarily of POS terminals, forms and envelopes. The cost of
inventory is determined using average cost for POS terminals and first-in first-out ("FIFO") for forms.
Investment Securities
The Company maintains investments in marketable and non-marketable securities, the majority of which are carried at fair
value. These are included in the "Settlement assets", "Other current assets", "Long-term settlement assets" and "Other long-term
assets" line items of the Consolidated Balance Sheets.
The specific identification method is used to determine the cost basis of securities sold. As of December 31, 2011 and 2010, all
of the debt and equity securities were classified as available-for-sale. Unrealized gains and losses on these investments are included as
a separate component of OCI, net of any related tax effect. The Company assesses marketable securities for impairment quarterly.
Cost method investments are evaluated for impairment upon an indicator such as an event or change in circumstances that may have a
significant adverse effect on the fair value of the investment. If no such events or changes in circumstances have occurred, the fair
value is estimated only if practicable to do so.
For equity securities, declines in value that are judged to be other than temporary in nature are recognized in the Consolidated
Statements of Operations. For public company equity securities, the Company's policy is to treat a decline in the investment's quoted
market value that has lasted for more than six months as an other than temporary decline in value.
For debt securities, when the Company intends to sell an impaired debt security or it is more likely than not it will be required to
sell prior to recovery of its amortized cost basis, an other-than-temporary-impairment ("OTTI") has occurred. The impairment is
recognized in earnings equal to the entire difference between the debt security's amortized cost basis and its fair value. When the
Company does not intend to sell an impaired debt security and it is not more likely than not it will be required to sell prior to recovery
of its amortized cost basis, the Company assesses whether it will recover its amortized cost basis. If the entire amortized cost will not
be recovered, a credit loss exists resulting in the credit loss portion of the OTTI being recognized in earnings and the amount related to
all other factors recognized in OCI. The Company adopted this accounting for OTTI effective April 1, 2009 in accordance with new
accounting guidance and the cumulative effect is reported as "Adjustment resulting from adoption of new accounting guidance" on the
accompanying Consolidated Statements of Equity. Refer to Note 7 of these Consolidated Financial Statements for a detailed
discussion regarding the fair value of the Company's investments.
New Accounting Guidance
In May 2011, the Financial Accounting Standards Board revised its guidance on fair value measurements. The amendment
clarifies certain aspects of the Board's intent for the application of existing fair value measurement requirements and additionally
changes certain requirements for measuring fair value or for disclosing information about fair value measurements. The amendments
will be effective for the Company during the first quarter of 2012. Adoption of the revised guidance is not anticipated to have a
material impact on the Company's financial position or results of operations but management is currently assessing the impact on its
fair value measurement disclosures.
In September 2011, the Financial Accounting Standards Board issued guidance related to testing goodwill for impairment.
Under the amended guidance, an entity has the option of first assessing qualitative factors to determine whether events and
circumstances indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If it is
determined that the fair value is more likely than not greater than the carrying amount then the two-step impairment test is
unnecessary. The Company adopted the amendments for its 2011 annual impairment test. After performing a qualitative assessment,
the Company proceeded to step one of its impairment test.
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